Accounting Essentials: Tips for Improving Your Tax Planning
As a business owner, you need to be on top of your company’s financial records always. A tax plan can help you in staying prepared and in the loop of the ins and outs of your cash flow. Having a tax plan is a crucial part of maintaining your business’s operations while maximising your potential tax returns.
Creating your tax plan
The Australian Taxation Office (ATO) defines what income bracket your business should belong to, whether you’re a self-employed individual or an owner of a company. That will set what type of tax rate you’ll incur throughout the fiscal year. You need to coordinate with your business accountant to project your expected taxable income and the strategies your tax plan should have in facing the 2020-21 fiscal year.
Expecting a higher income for the remainder of the 2019-20 fiscal year
If you’re expecting a high amount of income for the remaining months in this financial year, you should talk with your accountant to consider adjusting your tax payment procedures.
Pre-paying your 2020-21 expenses, such as insurance, rent, and subscription to professional associations from the 2019-20 year, will be deducted on the following year’s costs.
You can also take advantage of instant asset write-offs, which will allow you to deduct your asset purchases to cost less than the accompanying threshold, regardless of whether it’s brand new or second-hand.
Lastly, you can choose to postpone your invoicing to carry over to the following year, which can help in managing your finances, where applicable.
Predicating an upswing of business activity for the upcoming 2020-21 fiscal year
On the other hand, if your company is gearing up for a potential upswing in the following fiscal year, you can consider preparing your strategies as early as now.
Maintain the regular payment of your expenses as they are due, instead of pre-paying them in advance within the current tax year.
Purchase any required assets or equipment this year that will be necessary for alleviating the load of your operations in the following year. However, keep in mind that you should avoid spending on business assets for the sake of getting tax deductions.
General tax plan strategies to try out
Some strategies aren’t dependent on your tax plans but are more on a case-by-case basis and emergencies. For example, different policies have been in effect to deal with the economic repercussions of the coronavirus pandemic.
The ATO put provisions in place for businesses that were affected by the COVID-19 pandemic. You’re eligible to have an extended deadline on paying your debt and lodge tax forms. You’re also allowed to re-issue tax returns, notices of assessment, and activity statements.
GST cash accounting allows you to pay on a cash basis compared to accruals. That means that you’ll be spending your GST directly to the ATO after you collect it, not when you issue your invoice. It’s an effective way to improve your cash flow without waiting for delayed payments.
In planning a tax plan strategy, you need to make sure that your business’s accounting holds accurate and updated information so that you can maximise the deduction on your logbooks. Thankfully enough, you can make use of digital software to make the archiving and cataloguing of your records to be more efficient and easier to find. That allows you to make effective financial forecasts in assessing your business’s current state and potential growth rate.
If you need reliable accountants in Gold Coast to give you expert advice in handling your company’s accounting, our team of professionals is here for you. Get in touch with us today, and we’ll make sure to steer your business in the right direction!